Tuesday, March 12, 2013

Dayang Enterprise Holdings Bhd (DAYANG, 5141), an oil & gas company specilized in offshore topside maintenance services (TMS), offshore hook-up and comissioning (HUC) services, etc. is considered to be one of the largest offshore platform services providers in Malaysia.

Just like most other East Malaysia companies listed in KLSE, most of the time DAYANG remained undetected from the radar screen of most investors. It gained attention since Q4 2012, especially after announcing a superb quarterly report on 19 November 2012 with single quarter EPS of 7.52 sen, and its share price hitting historical record one after another from then onwards.

DAYANG share price hit RM2.72 on 21 January 2013 with high volume of 5.07 million shares transacted. After that, its share price dropped gradually to as low as RM2.34 on 25 February 2013, probably due to the sell down from Lembaga Tabung Haji.

It announced a poorer quarterly result on 26 February 2013 with lower revenue, but net profit is not affected too badly due to higher margin. A 5 sen tax-exempt dividend was announced, going to ex on 15 March 2013. Its share price moved up again, testing the previous high of RM2.72 on 3 March and 6 March 2013. Then, its price corrected to RM2.6x before regained momentum and hit its new record high of RM2.98 today morning and closed at RM2.85 at high volume of 6.58 million shares transacted.

Its intraday chart for 12 March 2013 is as below:

DAYANG is an associate company of Naim Holdings Bhd (NAIM, 5073) and the financial performance of NAIM is currently pretty much depends on its 33.6% holdings of DAYANG. NAIM share price rose 10 sen from RM2.23 to RM2.33 today (12 March 2013).

DAYANG is financially healthy with strong cash position of about RM300 million. It recently acquired about 26.1% shares of its new associate company Perdana Petroleum Bhd (PERDANA, 7108). PERDANA and PERDANA-WA prices also rose in tandem with DAYANG and NAIM today (12 March 2013).

PERDANA was not doing well financially before DAYANG's acquisition, and is currently on its way making a turnaround. Recently, it disposed 7 old vessels with average age of approximately 30 years to PT Ninda Pratama Vriesindo from Indonesia, for a total consideration of US$3.45m. This move is expected to save about RM10-12 million annually in maintenance cost for PERDANA, and is viewed as an important move in its financial restructuring exercise.

DAYANG is teaming up with PERDANA to bid for a contract potentially worth RM3 billion from Shell, involving the Pan Malaysia Umbrella HUC project. Both DAYANG and Petra Energy Bhd (PENERGY, 5133) are shortlisted and the contract is predicted to be announced soon. Interestingly, PENERGY is an associate company of PERDANA, as PERDANA holds about 29.6% shares in PENERGY.

DAYANG has outstanding contracts worth some RM1.2 billion that could keep it busy until 2016.

The oil and gas activities in Malaysia is very active now. In 2012, Petronas has made 22 domestic discoveries, signed 9 Production Sharing Contract (PSC) agreements, awarded more contracts for marginal field Risk Service Contract (RSC), etc.

Today (12 March 2013), Lundin Petroleum, a Swedish-based independent oil and gas explorer, announced that it found more oil trapped in sand offshore Pahang, Malaysia after drilling in Block PM308A, as an extension to its discovery of oil sands in the same area in 2011.

Malaysia's deepwater reserves potential is estimated to be 10 billion barrels of
oil equivalent (BBOE), and only 3 BBOE have been discovered so far, leaving another 7 BBOE yet to be discovered.

All these new oil and gas development in the region are expected to bring benefit and money to the Malaysian O&G companies. This is the catalyst that will bring analysts' attention to O&G counters in KLSE.

DAYANG is currently covered by HwangDBS, OSK, Public Bank, HLG, RHB, BIMB, etc. All are making "buy" call. HwangDBS and HLG both set its target price to RM3.36 as of today.

Disclaimer: This article is intended for sharing of point of view only. It is not an advice or recommendation to buy or sell any of the mentioned stock counters. You should do your own homework before trading in Bursa Malaysia.